Spreads on various types of residential MBS are wider than they were during the early days of the pandemic, suggesting that the assets aren’t particularly attractive to investors. However, that isn’t necessarily true.
Not too long ago, the asking price for scratch-and-dent mortgages was considered silly but buyers paid because the returns were strong. And today? It’s a whole different ballgame.
Freddie recorded the biggest decline in the agency market, while Ginnie dodged the worst of the downturn. Agency multifamily MBS issuance was up, however, as was non-mortgage ABS production. (Includes three data charts.)
It’s not every day that bond-investing giant PIMCO pulls out of a market, but for now the whole-loan buyer is avoiding non-QMs. Also, part of the story: the closures of FGMC, Maverick and Sprout Mortgage.
Sponsors of non-agency mortgage-backed securities have been busy of late. One goal is to clear out older, lower-yielding paper. At least two recent deals fit the bill and more could be on the way.
The REIT has built up strong residential and MSR businesses to diversify risk and support its agency prowess. And while it’s held back on increasing leverage, once volatility declines, all that may change.
Non-QM lending may sound good to conventional originators looking to bolster their menus, but headwinds are still evident. Low-yielding paper still needs to be moved but financiers and acquirers are having second thoughts.
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